Valuation

No fishing sign.
Valuation methods can be used to understand the impacts of a closed recreational fishery resulting from a pollution event.

Valuation

Because habitats provide numerous benefits, economic valuation can be quite complex. When possible, our economists use service-to-service scaling to calculate required restoration acreage. However, in some situations we quantify lost ecosystem services in monetary terms. In these cases, we use a set of analytic tools to assign dollar values to natural resources and the services they provide.

Revealed Preference Methods

Revealed preference methods are a group of economic tools used to estimate the value of goods and services. They use observations of individuals’ choices to infer the preferences and values these choices represent. When a hazardous release or oil spill restricts recreational activities, one of the most commonly used revealed preference methods is the travel cost method. This approach assumes that when people pay to travel to recreational areas, the trip is worth at least that much to these individuals. After collecting information on the cost of travel by conducting surveys and examining park visitation data, economists can estimate the dollar value of a typical recreational trip.

In its simplest form, a travel cost analysis might define lost user-days as the number of days a beach was closed, multiplied by the expected number of visitors per day if the spill had not occurred. The number of lost user-days would then be multiplied by the dollar value of an average recreational trip.

Stated Preference Methods

Our economists may also consider losses to the non-recreational services provided by an injured habitat. For example, an ecosystem may improve water quality or help control erosion, but the public does not pay directly for these services. Further, members of the public may value natural resources with which they never interact (known as existence or non-use value), and experience a loss in value when these resources are injured. In order to include these types of benefits when estimating losses, we sometimes need to survey the public about their preferences. Stated preference surveys ask people about the values they place on habitats and ecosystem services. We can then use this information to help estimate the total economic value lost due to habitat injury.